Sterling

TSL EXPRESS EXTRA

Thomas Geisel and Michael Haddad: Leading Sterling’s New ABL Division Into the Future

By Michele Ocejo

Sterling Bancorp., through its principal subsidiary, Sterling National Bank, announced on March 31 that it had completed the acquisition of NewStar Business Credit, LLC, which was a wholly owned subsidiary of NewStar Financial Inc. Sterling acquired client relationships with over $330 million in loan outstandings as of March 31, 2016, doubling its existing asset-based lending loan portfolio.

In addition to Sterling's acquisition of NSBC's client relationships and loan portfolio, NSBC's leadership team and support staff joined Sterling's experienced asset-based lending division. Michael Haddad, former president of NSBC, will manage Sterling's asset-based lending business.

What factors influenced Sterling’s decision to acquire NewStar Business Credit? GEISEL: This acquisition was the continued execution of our strategy to expand the specialty lines of business nationally. We acquired a payroll finance company and a factoring portfolio in 2015, and this was the next logical step to enhance our ABL practice nationally.

What about these two entities makes this such a good fit?
GEISEL: I think there are a couple of things. The first is that the portfolios were almost a mirror image of each other in size, so one wasn’t too large, one wasn’t too small, it was a nice blending of portfolios. They were also complementary as far as no real industry concentrations. When you look at bringing portfolios together, you try to look at the before and after and what does the after bring you? And in this case, it made us stronger from an overall general portfolio diversification. It didn’t create a concentration in one industry or the other, so there wasn’t a lot of industry overlap, which we thought was positive.

The third thing was that our portfolio, while it is national, is primarily centered in the Northeast and NSBC’s portfolio was primarily centered nationally. So it gave us a nice expansion as did the profiles of our prior acquisitions to take our Northeast concentration and expand it across the country.

And then last, but certainly not least, and actually the most important, as we spent more time with Michael and the NSBC team, we saw that there was an alignment from a cultural and an organizational perspective. There was a primary focus on clients and on execution. And those two things are very important to have working in tandem. So we felt like culturally and from an organizational philosophy perspective, there was a nice match there.

HADDAD: I’ll add a little anecdote to what Tom said. As we walked out of our first meeting with them it dawned on me that “Sterling was a lot like us”, meaning they had a great specialty finance practice. Even though they were “regulated” lenders, they sounded a lot like us, meaning the ABL world, and especially the finance world, so we were comfortable with them very quickly. They understood what we did and how we did it. There was a very good cultural fit from the first day we met.

What new opportunities does this acquisition open up for Sterling? GEISEL: When we talk about Sterling, we’ll talk about the old Sterling and new Sterling when it comes to ABL. From a macro perspective, what it really allows us to do is to enhance our brand with multiple product lines across the country. It also allows us to leverage NSBC’s and Michael’s team’s reputation as an asset based lender of choice and then layer in our cost of capital and the additional products and services that we can bring to the table. So now we can take a very well-known specialty lender, and add in our cost of capital, the additional products and services that we have from a banking perspective and provide more value add to that client base. At the same time, we can enhance our brand recognition across the country which leverages our other seven national lines of business.

HADDAD: For us, we think the opportunities are going to be vast. From a marketing standpoint, we’ll probably drift towards not doing the bottom 6 or 7 or 8 percent of the deals that we did in the nonregulated world. We’re going to be more additive and now that we have the great cost of funds that Tom just mentioned and a whole suite of other products that we didn’t have, number one being treasury management products, we think that the additive effect to that is going to be a multiple of the small piece we’re going to lose. So we think there are going to be significant opportunities for us to grow.

How will the new entity and its team be meshed with Sterling’s existing ABL shop?GEISEL: It’s a full integration. We’re doing our best not to talk about “we” and “they”, it’s “us” now as we’re moving forward. Michael is the leadership of asset-based lending, he’s our divisional president, he’ll be in charge of everything we do across the country, so it’s a full integration. We will work mainly out of two regions, New York and Dallas. We’ll have operational facilities in both of those locations.

HADDAD: We’ve got two A teams now and we’re really looking to put the best combined A team on the ground. We’re also adding to that team, so we’re really going to build on the national franchise we had. Adding the New York region was a big plus for us as that was a hole in our national franchise and now that is one of our strengths. So we’re enthusiastic about the new strength of our ABL business and what we can bring to the market now.

What are the immediate and long-term priorities and goals?
GEISEL: The number one goal is client satisfaction, that’s both short and long-term.

Have you received much feedback from clients?HADDAD: Yes, we have. The day after the acquisition we called every single one of our clients. They were all happy. We had eight of them ask about our treasury management products. They look at this as a great step forward for us. The name changed, of course our cost of funds changed, but what didn’t change is their delivery system and the team. And that’s the number one thing. The same team will do that again and again, so they’re real thrilled about it.

GEISEL: Any time there’s change, there’s a combination of uncertainty and opportunity. When you have an opportunity to sit down and talk to the clients about what the new things are that you are going to be able to deliver to them and, at the same time, commit to them that your execution and your support are not going to change, may even be enhanced, then they feel confident that this is a positive change for them. Clients are business people and at the end of the day they want the resources, the support and the certainty on how they’re going to run and grow their business. And if you can give them that, the road is golden.

Are there any new industries you’re looking to focus on or anything in that area?
HADDAD: No, we are, as an asset based lender, very agnostic as to industry. We play in literally every industry across the whole spectrum, save a couple like contracting where there is progress billing and things like that. But, no, we’re going to do more of what we did and do a lot more of it hopefully.

You touched on this a bit earlier, Michael, but obviously your team is moving from a nonbank-owned financial institution to a bank-owned one. You said you do share cultural and organizational philosophy, but are there any other opportunities that you think these changes will offer? HADDAD: Yes, I do. When we set this company up eight years ago the thought was always that we would go back to a regulated environment or go public, so we set it up close from a SOX standpoint, from a regulated standpoint, as close as we thought we can be. So we don’t think there’s going to be ground-shaking changes in that regard. Yes, there are changes any time you go to a new organization, but I think the opportunities that it is going to offer are really best practices. And we’re going to look at best practices across both platforms and the new Sterling, as I like to call them, has a lot of best practices. So we’re excited to take some of those, overlay it on what we do, and that will enhance our national presence.